Hold Oil India; target of Rs 325: Sharekhan
Sharekhan is bullish on Oil India has recommended hold rating on the stock with a target price of Rs 325 in its research report dated September 07 2017.
Sharekhan's research report on Oil India
Oil India Limited’s (OIL) domestic 1P reserves base for oil and gas at 29mmt and 77mmtoe (as on 31st March 2017), respectively, provides production visibility of around nine years for oil and ~26 years for gas at FY2017 production rate. In our view, weak oil reserve profile is a cause of concern in case OIL is unable to convert its 2P oil reserves of 79mmt to 1P reserves in the coming years. Moreover, the 2P reserve mix in favour of gas (accounts for 61% of overall 2P reserves of 203mtoe) is also unfavourable as development of gas reserves would be difficult in the weak domestic gas price environment (current gas price of D2.48/ mmbtu).
We maintain our Hold rating on OIL, given the muted earnings outlook (weak oil/gas realisation and production) and lower RoE of 7% over FY2018E-FY2019E.
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